I wanted to share the information from this article I found in the Reader’s Digest, March 2013 issues (p.37).

1. We love getting more of anything. Example: you walk into a Starbucks and see two deals for coffee. The first deal offers you 33% extra coffee. The second takes 33% off the regular price. What’s the better deal? Are they equal? Imagine if a coffee cost $1 for three litres ($0.33/litre). The first deal gets you four litres for $1 ($0.25/litre) and the second gets your three litres for $0.67 ($0.22/litre). The second deal is better. We do emotional math: getting something extra “for free” feels better than getting the same for less.

2. We’re heavily influenced by the first price we see. Imagine if you go into a high end store and see the cost for a bag to be $7000. That’s crazy you think. In the same store you see an awesome watch for $350. Compared to a Timex it’s expensive. However compared to a $7000 bag it’s inexpensive. The store using their marketing to massage your expectations for spending.

3. We shy away from high and low prices. Example: beer. Given a choice of different prices of beer most people choose the middle-price option. Let me show you. Researchers offered people two kinds of beer – a premium brand for $2.50 and a bargain brand for $1.80. Around 80% chose the more expensive beer. Then a third beer was added to the selection a super bargain beer for $1.60. Now 80% bought the $1.80 beer, and the remainder the $2.50 beer. No one bought the cheapest option.
Third time around, researchers removed the $1.60 beer and added a super-premium beer for $3.40. Most people bought the $2.50 beer, small number chose the $1.80 beer and 10% opted for the most expensive beer.

4. We know a bargain when we see one. William Poundstone explains in his book, Priceless: The Myth of Fair Value, what happens when Williams-Sonoma placed a $429 bread-making machine next to it $279 model: sales of the cheaper model doubled, even though practically no one bought the $429 machine.

5. If we can see it, we want it . Savvy restaurants, for example, design their menus to draw our eyes to the most profitable items with things as simple as pictures and boxes. A good rule of thumb: If you see an item on the menu that’s highlighted, boxed or illustrated, it’s probably a high-margin product that the restaurant hopes you’ll see and consider.

6. We let our emotions get the better of us. When we feel like we’ve been ripped off, we literally feel disgusted, even when we’re actually getting a good deal. If a price of an item in your mind is too expensive and feel like you’re being ripped off (I’ve been on holiday and paid crazy amounts for water because I had no choice!) – some will sacrifice their need (i.e., hungry or thirsty) because so angry. On the flip side, when we feel we got a bargain we feel good about ourselves.

7. Alcohol and exhaustion make us dumber. When we are drunk, stressed, tired and otherwise inattentive, we’re more likely to ask only simple questions about buying things. Cheap chocolate bars and gum are situated near the checkout at grocery stores because that’s where exhausted shoppers are most likely to indulge cravings without paying attention to price. Boozy lunches are good for deal-making because alcohol narrows the range of complicating factors we can hold in our heads at once.

8. We hate paying for every little transaction. Stop paying for recurring payments like gym memberships and subscriptions to papers and services you don’t use. Unfortunately we are drawn to subscriptions and memberships partially because we seek to avoid transactions costs. We’d rather overpay a little than suffer the psychological pain of pulling out a wallet and forking our money over for each gym session.

9. We adore rebates and warranties. Consumers love rebates and warranties. The first buys the illusion of wealth (“I’m being paid money to spend money!”). The second buys peace of mind (“Now I can own this thing forever without worrying about it!”). Both are basically tricks. The experts agree that most warranties are not worth the extra money.

10. We’re obsessed with the number 9 . Up to 65% of all retail prices end in the number There is no difference between $20 and $19.99. In our mind the number 9 tells a different story: this thing is discounted. Someone priced this knowing how people think – you like things discounted and cheap. What 9 conveys is a silent understanding that a product is priced competitively and fairly. This is not true for the higher end stuff. If you’ll pay $700 then $699.99 doesn’t make sense. It does make sense for inexpensive items such as underwear. You are more likely to buy a product that ends in a 9.